Stockbrokers in emergency meeting as market panics

Barely 10 working days to the deadline for new capital base, stockbrokers are scrambling for workable solutions to stem the panic in the stock market.

The stock market had lost N595 billion within the first three trading sessions this week as stockbrokers piled up sell pressure from investors and personal trading accounts.

Chief executives of stockbroking firms met this week to discuss the current challenges at the capital market. The meeting was at the instance of the Association of Stockbroking Houses of Nigeria (ASHON), the umbrella body for all stockbroking firms.

ASHON has strong endorsements from the Chartered Institute of Stockbrokers (CIS), the statutory chartered regulatory body for the stockbroking profession and the Association of Issuing Houses of Nigeria (AIHN), the main body of primary market operators.

Reliable sources at the top-secret meeting said stockbrokers were worried about the continuing decline in the stock market, which could both undermine their personal recapitalisation plans and the emerging investors’ confidence in the stock market.

A source indicated that the emergency session, which was called within a five-hour notice, deliberated on the impending deadline for recapitalisation and further erosion of stockbrokers’ assets by the bearishness at the stock market.

Stockbrokers were worried that the implementation of the recapitalisation deadline could compound the negative market situation as several small and medium stockbroking firms, which serve as foot soldiers to retail domestic investors, may be unable to meet the deadline. The current efforts to raise funds have been hampered by the downtrend as well as the current banking regulatory regime, which bars commercial banks from investing in unrelated financial services.

While the market downturn has been driven by foreign portfolio divestments, the sell pressure from anxious domestic investors and cash-scrambling capital market operators have exacerbated the downtrend in recent trading sessions.

Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE), which opened this week at N10.156 trillion, closed on Wednesday at N9.562 trillion, indicating a loss of N595 billion. Nigerian equities had lost N814 trillion last week.

The Securities and Exchange Commission (SEC) has insisted on the December 31, 2014 deadline for capital market operators to comply with new capital requirements for their various functions. The apex capital market regulator had announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that is expected to take off by January 1, 2015.